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Masco (MAS) Cheers Investors With 68% Dividend Increase

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In a bid to reward shareholders, Masco Corporation MAS recently announced a 67.9% hike in quarterly dividend. The company has been driving shareholder value through regular dividend hikes, share repurchase programs, reinvesting in business, and selectively pursuing acquisitions with the right fit and return.

On May 13, Masco increased quarterly cash dividend to 23.5 cents per share from 14 cents paid earlier. The dividend will be payable on Jun 14, 2021 to its shareholders of record as of the close of business on May 28. The new payout translates to an annual dividend of 94 cents per share, with a dividend yield of 1.14%.

Notably, solid capital allocation strategy — which is a testimony to the fact that it is well positioned amid the COVID-19 pandemic — drives long-term sustainable growth and shareholder value.

In third-quarter 2020, its board approved an increase in the dividend rate to 14 cents per share from 13.5 cents. Notably, Masco has been paying dividend over the last several quarters. We note that dividend hikes are becoming a regular event for this home improvement and building products company. Masco has a consistent track record of increasing dividends. Notably, it paid dividends of $145 million in 2020.

Can Masco Sustain Dividend Hikes?

Masco is one of the leading cabinet manufacturers in the United States and holds one of the largest shares in faucets. Markedly, its strategic acquisitions and cost-controlling activities are commendable. The company has robust prospects across most of the business segments, which are stepping up its growth momentum.

Masco has maintained its focus on shareholder value creation by returning approximately $303 million and $36 million through share repurchases and dividends in the first quarter of 2021, respectively. The company intends to maintain a relevant dividend payout ratio.

Masco has been performing pretty well. It has been generating higher profits, courtesy of significant pricing actions and cost-control measures, despite raw material and logistics inflation. Strong Decorative Architectural Products and North American Plumbing segments helped it deliver better-than-expected results for the first quarter.

The company’s repair and remodel activity is poised to help it report stellar results going forward, supported by do-it-yourself and professional activity. Housing markets have been showing resilience of late, given Fed’s dovish stance, low borrowing costs and lack of available supply. We believe Masco’s shareholder-friendly policies and strong cash position will encourage investors in the upcoming quarters as well.

Share Price Performance

Shares of Masco — which shares space in the Zacks Building Products – Miscellaneous industry with Armstrong World Industries, Inc. AWI, Owens Corning OC, and Louisiana-Pacific Corporation LPX and currently carries a Zacks Rank #2 (Buy) — have outperformed the industry in the past three months. Its shares have gained 18.9% in the said period compared with industry’s 13.5% rally. Also, earnings for the current and next year are expected to grow 15.4% and 10.1%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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